Govt to cut energy subsidy by IDR 17 trillion

JAKARTA. Starts from 2017, the government will tighten the procedure for allocating energy subsidy. On energy, government will ensure that the subsidy will be allocated into eligible people.

Government and Budget Agency (Badan Anggaran) of the House of Representatives (DPR) on Tuesday (20/9) have agreed to allocate IDR 75.08 trillion of subsidy. The amount of subsidy is IDR 17.13 trillion lower than IDR 92.21 trillion proposed by government in fiscal note and 2017 State Budget draft (RAPBN 2017).

The agreement has cut almost all of government proposals on subsidy. For an example, the agreement set to allocate IDR30.31 trillion of subsidies on fuel and three-kilogram liquified petroleum gass (LPG), or lower than IDR 42.31 trillion of government proposal.

According to Deputy Head of Budget Agency Said Abdullah, the agency also referred to data provided by National Team for the Acceleration of Poverty Reduction (TNP2K), not only to data presented by Ministry of Energy and Mineral Resources in estimating the amount of subsidies.

Data from TNP2K showed that the number of recipients of subsidies on electricity and three-kilogram LPG was much lower than the estimation. For an example, on electricity, number of subsidy recipient at the segment of 540VA customer is 22.8 million, while subsidy recipient at the segment of 900VA amounted to 4.01 million.

In contrary, according to government record, the numbers of subsidy recipients at the segment of 540VA and 900VA customers are 22.8 million and 22.3 million respectively.

During the meeting with budget agency, government made estimation under the assumption of 19.1 million and 4.05 million of subsidy recipients at the segment of 540VA and 900VA customers. “We will gradually shift the customers who are not listed on TNP2K data to the group of non-subsidy tariff”, said Expert Staff on Communication and Social Affairs at Ministry of Energy and Mineral Resources Ronggo Kuncahyo on Tuesday (20/9).

Increase gradually

The government will gradually shift impose normal tariff for certain customers at the segment of 450VA and 900VA. The shift will be conducted within four phases and three phases for the customers at 450VA and 900VA, respectively in January, March, May, and July 2017.

During the meeting, Budget Agency also rejected government proposal to shift the subsidy allocation to develop new renewable energy (EBT). In 2017 Proposed State Budget (RAPBN 2017), government proposed IDR1.3 trillion of budgets to subsidize EBT.

However, according to Budget Agency, the subsidy allocation to EBT is inappropriate, on the grounds that the subsidy will flow to corporate, not to poor people. Whereas, Law No 30/2007 on Energy stipulates that subsidy has to be allocated to poor people.

Head of Fiscal Policy Agency at Ministry of Finance Suahasil Nazara said that the institution will find alternative funding sources to develop EBT without receiving subsidy. “This can be under the scheme of fiscal incentive”, he said.